The two buzzing and trending words over the internet “Bitcoin” and “Blockchain” must be tinkling the bug of curiosity in your mind. Not to worry, you are not the only one suffering from anxiety. There are millions of people with the same feeling as you.
The mass has heard about these words but are not actually aware of what it is. They google it to understand something out of it but it’s so complex for a person with non-technical background to get a hint. Bloggers like me come to the rescue who simplifies these complex sentences, so you can grasp a bit of these outlandish terms.
Bitcoin
You must be imaging some sort of coin in your heads from the pictures you have seen as below:
In reality, there is no such appearance of bitcoin. In fact, it’s virtual. You can neither see nor touch it. It is a kind of digital currency, generated by computers and transferred among two entities via computers. The transfer is faster compared to traditional and conventional currencies. There is a word “Cryptocurrency” associated with bitcoin. In point of fact, bitcoin is a subset of cryptocurrency. Don’t panic, I’m explaining what cryptocurrency is.
There a technique called “Cryptography” which uses encryption technique to secure the messages from the ones who are not intended to read them. There are public and private keys through which encryption and decryption of messages take place. You can use either symmetric encryption or asymmetric encryption technique. Bitcoin uses asymmetric encryption technique. So, it’s a currency using cryptography technique. Hence, the name cryptocurrency. Bitcoin is one of its kind. There are about 1000+ cryptocurrencies in existence. But, bitcoin is the most popular and sovereign of all.
So, now when you google “bitcoin definition” and the following result appears:
A type of digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.
You’ll be able to understand it till the separator based on the explanation given above. Let’s discuss about the latter part “operating independently of a central bank”. Bitcoin is a decentralized currency i.e. not governed by any central authority or financial institution. No one in the world has control over it. It is generated through computers (there are specific software programs and hardware of course) and transferred from one person to another directly without any central server. Here, all the nodes/computers are directly connected to each other.
You can see in the above image, how each node is connected to every other in the network. Now, you must be wondering how safe and secure this system is. If there is no central authority, who validates the transaction? Who makes it trustable? The answer to these questions is “Blockchain”.
Origin of Blockchain
“Blockchain” is the technology on which bitcoin works. It was introduced to the world along with bitcoin in the whitepaper entitled “Bitcoin: A Peer-to-Peer Electronic Cash System”. The author’s name was mentioned “Satoshi Nakamoto” but no one knows who this person actually is. Is it a group of people or an individual? That too is unknown. So, the biggest mystery of bitcoin and blockchain is the inventor itself!
Blockchain is responsible for the decentralized nature of bitcoin. It is a distributed ledger which records each and every transaction occurred till now. The first ever block called the “Genesis block” was mined by Satoshi Nakamoto himself in 2009. As stated earlier, bitcoins are generated through computers and the generators are known as miners.
Also Read: Issue on Cryptocurrency and Blockchain Technology
These miners solve the complex puzzle and on successful accomplishment, the transaction is added to the block. In return, the miner who has solved the puzzle first get bitcoins as reward. The reward is halved every four years. At the time of launch, the reward was 25 bitcoins per transaction and right now in 2018 it is 12.5 bitcoins. So, this is how, bitcoins are generated and brought into circulation. Because, of the reward being halved every four years, there will be a time when the result value would be zero. Because of this, there is a cap on the number of bitcoins which is 21 million.
After this amount of bitcoins are mined, the miners will only receive transaction fee as a reward. No more bitcoins will be generated. Upon calculation, the last bitcoin is said to be mined in 2104. Its next century!
Also Read: How to Mine your own Bitcoins?
The transactions occurred at same time are added to one block. And the bitcoin blockchain has a size of 1 MB. So, once this size is full, the transactions are added to next block. This way blocks are added and connected to each other forming a chain. Hence, the name blockchain.
Other Applications of Blockchain
Blockchain is not restricted to bitcoin only. It can be used for other purposes as well. In fact, Ethereum blockchain is one such example. It is an improved version of bitcoin blockchain. It takes 10 minutes to add a block in bitcoin blockchain whereas is takes only 12 seconds in Ethereum blockchain. Also, there is no limit on size of the block.
Apart from this, it enabled “Smart Contracts” which is nothing but a small program embedded with each transaction. With these, it has become easy to add conditions which needs to be validated before committing the transaction. It adds more security to the blockchain. Other applications are:
· Land Registration
· Government organizations to speed up and automate the administration process.
· Financial Services
· Internet of Things (IoT) to build smart devices
· Healthcare
· Music industry to protect ownership rights
Final Words
Thus, the blockchain technology has wider enterprise applications and is not restricted to bitcoin only. It can bring digital revolution just as the Internet did in the past. And of course, bitcoin is gaining popularity like no one before. Keep your fingers crossed and hope for the best!